What’s price got to do with it?

A lot, apparently. This is especially true when it comes to how efficiently we use electricity in Trinidad and Tobago, and by extension, our natural resources, since virtually all the electricity we use is generated from natural gas. In Trinidad and Tobago, the average price of electricity is a mere US$ 0.06 per kilowatt hour (kWh), while the price paid in other Caribbean islands, prior to the recent decline in oil prices, was as high as US$0.43. Quite possibly, largely as a result of living in this low cost environment, the average Trinbagonian household uses on average 5 times the amount of electricity used by some of his Caribbean counterparts.

In 2012 the former Minister of Energy, Kevin Ramnarine, stated that,  “the World Bank has ranked Trinidad and Tobago as one of the worst energy-efficient countries in the world”. Well before Minister Ramnarine made those comments, one of the Caribbean’s renewable energy pioneers, the late Dr. Raymond Wright made similar revelations. Using the “energy intensity index”, Trinidad and Tobago was the second least energy efficient nation, of a list of seven Caribbean nations, including the likes of Barbados, Haiti and Jamaica. Such notable (but adverse) mentions should warrant our immediate concern.

In the face of such glaring energy inefficiency, some industrial companies, who also rely on natural gas to run their manufacturing, suffer chronic shortages in their supply. In December 2014, Pt Lisas companies reported losing $10 billion from 2010 to 2014, due to irregular supply of natural gas. According to the then minister of energy, the gap between supply and demand of natural gas is on the order of 5 to 10%. This shortage of supply provides us with a unique opportunity. When considered in the context that it could also play a mitigating role in the solution of other national challenges, such as, greenhouse gas reduction, energy efficiency improvements should be be viewed with increasing appeal.

Sustainable management of our natural gas resources requires us to capture maximum return on its utilization and ensure fair use for future generations, all while minimizing environmental degradation and other negative externalities. Efficiency within the electricity sector, both on the supply and demand side, can result in a net reduction in the volume of gas consumed. The gas savings derived can then be put to more productive uses, for instance, it can be exploited by those industrial users who currently experience gas shortages. Such a productivity gain could directly improve the nation’s wealth, increasing our ability to produce those goods that will support the growth in our economy.

If energy efficiency is a building block of sustainability, then energy efficiency targets and price must be frameworks within which wasteful energy use is restrained. Economists have argued that price is the most effective mechanism to curb excessive use. This idea is supported in the view put forward in the Natural Gas Master Plan by UK-based consultants Poten and Partners. According to the consultants, ”the gov’t should establish a power price that at least reflect(s) the cost of service of supply. This would encourage more efficient energy use and bring greater revenues to T&TEC.” Price, as well as, the mechanism of setting energy efficiency targets both have their place in promoting efficiency and therefore sustainability in our gas use. I will discuss the role that each could play in several articles to follow.

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